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Are Benefits Enough? How Small Businesses Are Faring in A Tight Labor Market

By Nancy Mann Jackson

The U.S. economy has
reached its lowest unemployment rate in 30 years, and the employed share of the
adult population is at an all-time high. While full employment is good news for
the U.S. economy, it presents challenges for small business owners who need to
hire workers: They must compete for talent with businesses of all sizes, and
quickly evolving technology means it's often difficult to find workers who have
the optimal skillset.

One-third (33 percent)
of small business owners plan to hire in the next six months, an increase from
25 percent just a year ago, according to Capital One's fall 2018 Small Business
Growth Index Survey. But the hiring process isn't always easy. Thirty-four
percent of small business owners report that the skills gap is the top factor
impacting their ability to hire, closely followed by competition from other
businesses (30 percent), financial resources (30 percent) and the tight labor
market (28 percent).

"Small businesses are
fighting with big businesses, startups and the entrepreneurial spirit of
today's emerging workers for scarce talent," says Jill Santopietro Panall,
owner of 21 Oak HRConsulting in
Newburyport, Mass. "They have to defeat cash-cow big businesses waving around
money and benefits, the exciting world of startups and also the general
inclination of many younger workers to just 'start their own thing' rather than
coming into an established business. That's an uphill battle."

How Small Businesses Can Compete

Attracting and keeping
qualified workers may not be easy, but for many business owners, it's essential
to building and maintaining their companies. Here are a few actions small
business owners might consider to attract talent and boost retention rates:

Rethink Benefits. Thirty-eight percent of
small business owners say their biggest hiring competitors are larger
businesses that can offer more robust benefits packages. Healthcare benefits,
while costly, remain highly valued by employees.

Even if you're offering
benefits, employees will still have to pay co-pays and deductibles. "The
minimum contribution from employers is 50 percent of individual benefits
premiums and 33 percent for a family plan," Panall says. "Some of my
clients can't offer more than the minimum contribution, and that's still
leaving a lot [of financial responsibility] on a younger worker or a lower-wage
worker. If you're offering health benefits, try to offer the best ones
possible."

Fifteen percent of
small business owners have changed their benefits packages to be more
attractive, and 9 percent have plans to change them. But 68 percent of small
business owners who offer benefits are confident that their package is
competitive.

As valuable as health
benefits are, they aren't the only benefits that can make a difference in your
ability to attract and retain workers. "Healthcare is important, but I find
that work-life balance and vacation time is more important to certain
demographics," says Matthew Burr, an HR consultant at Burr Consulting in Southern Tier, N.Y.
"If organizations can offer work-life balance perks, it will put them at an
advantage."

Those benefits include
things like flexible work hours or the ability to work from home, offered by 47
percent of small businesses, or paid time off, offered by 57 percent. Other
valuable options include free meals, snacks or other tokens of appreciation
(such as gift cards), or partnering with other local businesses to offer
reduced rates for yoga or fitness studio memberships, says Wendy Silver,
founder of Beyond the Workplace, an HR
consultancy in Massachusetts.

Boost Training Options. Ninety percent
of small businesses with two or more employees offer benefits, and the most
frequently offered benefit is employee training (provided by 67 percent). For
employees who want to continue to increase their marketability, training is a
valuable perk — and can be offered affordably.

Consider building
employees' skills and knowledge with a book club, suggests Samantha Reynolds,
communications coordinator for Helpside, a professional employer organization
(PEO) that provides small businesses with HR, employee benefits, payroll and risk
management services. "There are many great personal and professional
development books available," Reynolds says. "Many can be found online at
great prices, and others may be available at your local library. If books
aren't interesting to your employees, consider a podcast or video series that
might draw their attention. TED Talks can also generate a robust discussion,
and most are 15 minutes or less."

Other easy ways to
boost learning include hosting "Lunch and Learns" or using online learning
resources such as LinkedIn Learning, Udemy and Coursera, some of which offer
training at no cost, Reynolds says.

Lean on Your Network. Referrals and
networking continue to be among the best ways to find great talent, Silver
says. Because current employees are often the best referral source, consider
offering a referral bonus or perk to current staff who refer a candidate who is
ultimately hired.

"I advise that
employers who do this create a formal policy around when and how such bonuses
are paid," Silver says. "[The perk] could also be as simple as a gift card
or an extra vacation day."

In addition, consider
posting open positions in places where the ideal candidate may hang out. "This
could include everything from professional association websites to Facebook
pages," Silver continues.

Focus on Culture. While large companies
may offer robust benefits packages, small businesses can offer employees a
unique culture and environment that is worth their loyalty. "A lot of smaller
businesses haven't had the time, money or expertise to build an intentional culture,"
Panall says. "I find that folks often have a great idea, product or service,
and then [they] just start selling and doing the work without taking time to
slow down. [It's important to] set the vision and really think about how they
want to work versus just thinking about what they want to do."

Rather than dismissing
the idea of culture-building as something that will slow you down, taking the
time to truly develop a unique culture can be "incredibly important to
attracting employees and particularly for retaining employees," Panall
says. "You can sell people the dream and attract good employees, but if they
get in the door and it's all smoke and mirrors, they will leave —
quickly."